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As a journalist I have written about social issues and international affairs for the Guardian, the Independent, New Internationalist, Huffington Post, Equal Times and the Big Issue in the North, among other titles. I now work at the University of Leeds as a qualified careers professional, helping international students fulfill their career ambitions

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Guardian Live: will the market save us?

(Originally published by the Guardian)The late Nobel Prize winning economist, Milton
Friedman, once described free market capitalism as “the most effective system we have discovered to
enable people who hate one another to deal with one another and help one
another.”

Yet ever since
the 2008 financial crash this understanding has come in for intense criticism from
those who believe that unregulated markets are the cause of - rather than the
solution to - many of society’s problems.

So, can we rely on markets to save us? At the People’s History Museum in Manchester Steve
Davies, Education director of the Institute of Economic Affairs went head to
head with Catriona Watson, founder of the Post-crash economics society at the
University of Manchester, in front of an engaging audience.

Davies began by arguing that the financial crisis was an
entirely foreseeable event which, far from expose the failure of unregulated
markets, arose out of a misunderstanding of how markets ought to work:

“What lay behind it was a belief that the world was more
controllable, more predictable than it actually is,” he explained. “What policy
makers didn’t understand was that you’re dealing with a world of radical
uncertainty in which you ultimately have to have a system based on profit and
loss. That’s what capitalism is based on.”

The problem, according to Davies, was that too many people
believed any losses they incurred from poor investments would be subsidised by
the tax payer. This led to reckless investments which ultimately caused the
global financial crisis. Furthermore, if market principles had been followed,
governments would have done what Iceland
did and allow financial institutions to go bust. “A tough choice,” he admitted, “but the right
one because once it’s done we can get over the bad investment caused by the
artificial boom.”

Whilst the short term effects would have been disastrous for
ordinary people with savings in bankrupt banks, longer term the void would have
been filled by another central tenet of Davies’s market ideology: innovation. “What
drives market economies is innovation and what we’re seeing right now is an unprecedented
wave in innovation in the way commerce is organised through things like sharing
economies such as Air
BnB.”

Cariona Watson wasn’t convinced. Watson - who has campaigned
against rigid
economics curriculums at UK universities - argued that the profit-driven
higher education sector provides as good an example as any of the limitations
of markets:

“In order to market education you need to turn it into a
commodity. It’s the market mechanism of minimising marginal costs for maximum
gain for the university as a business rather than looking at how we’re going to
give these students a good education,” she explained.

According to Watson, market pressures mean university
economics departments are failing to create well rounded students who are able
to engage with related subjects, such as politics and social sciences. Consequently,
students who graduate in subjects like economics are often ill equipped to deal
with global problems such as the 2008 financial crisis.

Asked by an audience member whether the market could ever be
used to create a better society, Watson was deeply sceptical:

“People and institutions need to use markets to build a
society where appropriate but the market won’t do it by itself. Markets don’t
have an aim they respond to incentives and behaviour. It’s not a conscious
thing that can achieve things like building a fairer society; it’s institutions
and people who will do that.”

Another member asked the panel about social enterprises
which, according
to one study, are growing faster than mainstream businesses by responding
to the ethical demands of consumers: “Is that the market fixing itself and
becoming more ethical?”

“Yes, quite
possibly,” Davies replied, “Entrepreneurs and people in the business world are
going to respond to incentives and if there’s demand for ethical products they’ll
do that. Also the change in technology is making it much easier to fund, start
and organise alternative business models.”

Yet despite his unbridled positivity, Davies conceded one
snag. While markets are efficient drivers of economic growth, they are less
good at establishing social justice and equality. “Very often in society you
need to make a choice between greater efficiency and output on the one hand and
some principle of equity on the other. What you’ve got to realise if that there
is a trade-off. Too many people think they can have their cake and eat it.”

For many in the audience this trade off was too much to
digest. A straw poll following the debate found 70% disagreed with the motion
with only 30% leaving the hall convinced that markets can save us.

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